Sustainability is an important goal for many business leaders and organizations, but what does it mean and where should we start? The Chief Sustainability Officer of Dassault Systèmes, Alice Steenland, answers these questions and shares the leadership skills needed to be successful with sustainability.

The conversation includes these topics:

Alice Steenland joined Dassault Systèmes in 2020 as the company’s first Chief Sustainability Officer. Previously, she was the founding Chief Corporate Responsibility Officer at AXA Group, where she helped the company rise to a leading position in global sustainability rankings, thanks in part to a pioneering responsible investment strategy including the landmark decision to divest from coal and, later, tobacco.

Transcript

Alice Steenland: If you are not taking into account environmental issues, social issues; if you are not in sync with the society in which you're living in or you're operating in; your company is probably not going to be there in a long time.

What is the Chief Sustainability Officer role?

Michael Krigsman: We're speaking with Alice Steenland. She is the chief sustainability officer of Dassault Systemes. Alice, tell us about Dassault Systemes and give us a sense of your role as chief sustainability officer.

Alice Steenland: Dassault Systemes, for those of you who don't know us, we are sort of a world leader in what we call virtual twins, so creating a virtual universe in which you can in fact invent, design, and create anything. That's what we do. We make those for companies and also for universities and different sizes of organizations and types of organizations.

I am the chief sustainability officer there. It's a newly created function. It was created last year. But I have been the chief sustainability officer for many years in other organizations and have been working in this field for about 20 years.

Michael Krigsman: Why did Dassault Systemes create this chief sustainability officer role?

Alice Steenland: It's a company that has had (in its mission) a corporate purpose, as we say. This idea of enabling sustainable innovation to harmonize product, nature, and life. That's been there for many, many, many years.

I think the idea was that the virtual universe (in and of itself) helps increase the sustainability footprint of an organization because if you are no longer making thousands of physical prototypes and trying new manufacturing processes that you have to redo over and over again because you don't know if they will work, you are wasting massive amounts of resources, of energy, of water. You are being very wasteful, in fact.

Doing all of this in a virtual world means that you're doing it the first time right. You are being, in many ways, more efficient and more sustainable in the use of resources.

I think what has changed now and what pushed the company to create this function and create this position is really that the world has changed so much. Not only do people want to think, "Oh, well, I'm doing this better." They want to know exactly how they're doing this better. They want to measure the CO2. They want to measure the savings in terms of water. They want to measure their impact on the environment, understand what they're creating, what its impact on the world will be, and that's because the expectations are rising from investors, from consumers, from everyone across the board today.

What is sustainable development?

Michael Krigsman: There's a kind of rising tide of interest in sustainability. What does it actually mean? In the press, it's kind of used in a very loose way.

Alice Steenland: I've been in this space, as I mentioned, for a long time. I have seen, in very different parts of the world, it actually has different connotations.

It's not only a word that can be used very differently in English. So, I'm an American. I've used this word for a long time.

Not only does it have different interpretations here, but different interpretations across the world. I'll give you one definition – actually, two, if I can.

The first one is the actual meaning of the word sustainability, the original meaning, which was to say, if I am a sustainable company or sustainable organization, it means I will be here in 20, 30, 40 years. I can sustain my activity.

That's where the original concept came from, which is that if you are not taking into account environmental issues, social issues; if you are not in sync with the society in which you're living in or you're operating in; your company is probably not going to be there in a long time. That's actually, from an investment perspective or financial perspective, what we've seen. We've seen, for many years, sustainable or ESG high performers basically outperforming the market over long periods of time.

I think that's one way to think of it. It really is about the sustainability, the viability of the organization over time.

The second way of thinking about it is this ESG terminology: environmental, social, and governance issues. This is the definition used by the investment community to talk about sustainability. It just gives you an idea of what are some of the things that they're looking at.

In fact, a funny fact is that they used to call this extra-financial or non-financial information, which essentially meant that any indicator, any process, or any information about the organization that is not purely about revenues and sales can be considered material from an ESG perspective. So, it is a very broad topic.

What are the components of sustainability in business?

Michael Krigsman: When you, as a sustainability professional, talk about sustainability in business, are there components? How do you break it down? How do you think about it?

Alice Steenland: ESG, in itself, is a framework, right? You're looking at the E, the S, and the G. That's one type of framework. Another type of framework is taking all of those issues and looking at the most material issues for your sector and for your company.

Obviously, the issues that I'm focused on working in a tech company are not the same as my colleagues who do the same job in a food manufacturing firm, right? They're going to be very focused on agricultural issues, land use issues, biodiversity issues.

I am very focused on:

  • How do you green IT?
  • How does IT green the rest of the economy?

We're all working on slightly different aspects. So, materiality is another term you hear a lot, and that's a framework for thinking about which issues you prioritize within that.

Then there's another framework that's very commonly used, which is inside-out. Starting from, what are my own operations? For Dassault Systemes, what are our direct operations? Where are our priorities in that circle of influence? Then, what are we doing for the rest of the world? What are our products and services doing to impact the rest of the world?

Then beyond that, even beyond our customers, how are we engaging with the broader community, other types of stakeholders, regulators, investors, all of our supply chain? How are we interacting with that larger circle? That's another way of thinking and working on these topics is the inside-out type perspective.

Sustainable business practices: social development and economic development

Michael Krigsman: Correct me if I'm wrong. It seems like there are two components, two aspects. One is the business performance dimension. Then number two is something that strikes me as a little bit squishier, a little bit more vague, which has to do with contributing in a positive way to the world. Is that a correct way to view it?

Alice Steenland: [Laughter] That is one way to think about it. For example, there are different reporting frameworks out there. Some of them are focused on what are the ESG issues or the sustainability issues that will be most material financially within the next five to ten years.

That's one way of looking at it, and that's really about performance. Like, let's prioritize those issues that are going to actually translate into a direct financial impact in the medium-term – relatively soon.

Then there are other reporting frameworks in terms of what you're supposed to be accountable for that actually come from the stakeholder perspective. What are all of the stakeholders of the organization, and that includes the planet (the natural environment)? That includes civil society. That includes obviously your employees, your suppliers, and your customers.

But you can take that stakeholder perspective and say, "What is it that our company is doing that impacts them?" If we know that's important for our stakeholders, eventually, that will be important for us, and eventually, it will have a financial impact. If we don't take into account those stakeholder perspectives on what they care about, the issues they care about, eventually that's going to come back to sort of get us.

Those are two slightly different ways of looking at that set of issues that we've got in front of us.

Michael Krigsman: There are a number of different pieces that come into play when you talk about sustainability, and so it seems like the equation becomes very complex very quickly.

Alice Steenland: You could say that. I would say it's becoming even more complex because you've got concepts like not only zero-carbon; now we've got the circular economy. There are these different ways of thinking about how to get to the solution or how to find solutions to get to a much more sustainable economy, and they are going to be diverse and multiple and there will be lots of ideas out there.

In fact, we're seeing this rise in interest in the topic on all sides: regulators, consumers, et cetera. That means a proliferation of ideas of, "Oh, have we tried this? Can we try this?"

We need those new ideas. We need these, what I call moonshot ideas, crazy ideas. But that does put us in a situation where it's becoming a very noisy field with lots and lots of information, new initiatives being launched, new legislation being launched. And so, I think, for folks that are new to this topic, sometimes it can actually be quite overwhelming – even just the jargon. Yeah.

Michael Krigsman: One of the things that you've mentioned a couple of times are the economic impacts. Would you maybe explore that for us a little bit?

Alice Steenland: Let's just take what we've seen, I'd say in the last couple weeks. For those of you who have been following the news on this, several fossil fuel organizations had been hit by legal decisions, regulatory shifts, and a bunch of sort of unexpected (I would say) surprises in terms of questioning the core business model.

This is something that, for folks working on sustainability, has not come as a surprise because this type of event where you have sort of a sudden loss in the valuation of a company is quite common in the ESG field, which is that a topic like human rights, climate, or the way you treat your employees is not material until one day it is. It becomes very material all of a sudden, so there are a lot of these shocks to the system.

The health and safety on oil rigs hit BP very hard many decades ago, and there have been these repeated sort of shocks to the system. This is what we've called in the ESG investing committee for a long time – because I worked in finance for many years – "stranded assets".

These are assets that people own. They're in stocks and portfolios across the world. People have stakes in these companies, and they all of a sudden one day become stranded because the entire ecosystem around them has changed, the winds have changed, the tide has changed, and there's been some shock to the system that creates very drastic drops in valuation.

That's actually what we're starting to see with fossil fuels, but it's what we've seen with some other companies in terms of human rights abuses in their supply chain, et cetera. It's a very, I would say, material financial issue. I'm not even talking about the legislation that's coming online, which is going to be a direct cost for companies that are not ready for this.

Sustainability and ethical leadership

Michael Krigsman: Why is there this intersection between sustainability and ethical purpose? That seems less clear to me.

Alice Steenland: One of the (I say) thorniest topics comes back to your earlier question about, is there a financial side of this, and then sort of like a social kind of side of this? This is a space in running an organization today where those worlds are sort of mixing. It makes for a very thorny topic.

What we're seeing now is employees really speaking out very loudly about what they want or they don't want their companies to do in terms of policies, behaviors, and the way they engage with customers and things like that. We've seen it obviously in the areas of racial justice, but also in the areas of climate where actually the employee base is getting organized and saying, "We want more of this," or "We want less of this."

That never really happened before. That's really changing the dialog and the way people are thinking about the role of business in the world.

Before, you had your business side, and then you had people's ethics and their personal, you know, what's important to them personally, et cetera. These were two different spheres.

What we're seeing is this merging of the two spheres. That is making it very tricky. I think, for CEOs today, it is very complicated to walk that line.

Michael Krigsman: There is this very strong balance then between sustainability and the corporate policies, as they affect the social fabric, just in general.

Alice Steenland: Yeah. I think so. On the flip side, one of the things that is, I would say, getting easier in this topic is that I think the financial upside of doing more on environmental, social, and governance issues—and doing better in that area—is becoming much more clear as well, right? It's becoming trickier, harder, and more complicated, but the upside, I think, is becoming much clearer.

You have the rising generation of millennials. Very clear about the fact that they will associate, buy, and invest in organizations that prioritize environmental and social issues. They're putting their money where their mouth is, and what we're seeing is a generational shift in wealth towards that category of consumer, if you will, or citizen. That is just going to change the way you think about marketing products, about creating new products, about engaging consumers, and that's a big part of the new upside to sustainability, which is a very clear demand on that side.

Dassault Systemes headquarters is in France, and so we have a very large footprint globally, but a very large footprint here in the EU. We're subject to the EU regulations, and we are seeing things come online that are clearly going to change the playing field and are going to give a huge advantage to companies that know how to manufacture with zero carbon emissions, that know what a circular product looks like, and have an idea of a business model of how to make that work. Those companies are going to be positioned very well, and it's very clear that that's going to change the landscape and give it a real opportunity and advantages to companies that move quickly on this.

Michael Krigsman: Alice, is sustainability, therefore, a net positive or a net negative (from an economic standpoint) in business?

Alice Steenland: In the minds of most leaders around the world, it is right now changing quite quickly. I think this area, for a long time, was seen as kind of like compliance. It's like we have to do some of these things. It's not a legal requirement, but really everybody is expecting it from us, so we've kind of got to do it. It's a cost center, et cetera.

Now, I think we're in a very different space, which is, if you just take the energy sector and the massive global ambition on greening the energy sector—and that's just one sector but it's a very obvious one—if you're an energy player and you're not well positioned on renewables today, your business is going to be in trouble in a few years. You need to understand the dynamics of this change.

I think more and more folks are seeing that this is not about just sort of making people happy or doing the right thing. This is a massive global business opportunity.

In fact, there was some research done a few years ago talking about the energy transition and highlighting what sectors had to gain from the innovation, the innovations coming online, and the revenues that would come from those. We're talking about $12 trillion annually of new innovations and new opportunities for growth for different sectors. For the companies that are well-positioned on this, I think this is a wonderful, positive opportunity.

Michael Krigsman: Arsalan Khan says on Twitter, "All organizations use IT, and the greening of IT would definitely help them."

Alice Steenland: Absolutely.

Michael Krigsman: He asks, "Do organizations of different sizes and industries share their lessons learned with each other because, without that sharing, sustainability would be very piecemeal?"

Alice Steenland: The interesting thing about the tech sector is that it is the only sector where the emissions are exponentially growing year on year. That's because a lot of the other sectors are using technology to become more sustainable and green their operations.

It's a strange paradox, but it is calling increasingly more and more attention to the issue of green IT. You know I work for a software company. How do you green software, is becoming an issue.

Our friends at Microsoft just launched a green software foundation a week ago. This is becoming a big thing. How do you green software? How do you make code that's greener? The entire IT sector, especially the hardware producers, are very focused on this (the leading actors around the world) because it is a serious issue.

To the question about collaboration, just to give an example, we are part of a couple of organizations. One is called The Global Enabling Sustainability Initiative. That is an organization that brings together companies from the entire ICT sector – telecoms, hardware manufacturers, software manufacturers – bringing us together to say, how can we be more sustainable across the entire ICT sector?

We just launched, with that organization, something called Digital with Purpose, which will be a global certification scheme, a little bit like organic food today. You will get a label. If you are a high-performing, sustainable tech company. We're coordinating also with governments around the world to say, when you do your procurement and you are in government, this will be a sign of quality. This will be like a quality certification, like an ISO certification (in the future). That is an example of collaboration.

Another one is we're a founding member of the European Green Digital Coalition. That's a similar idea backed by the EU, so it's very stakeholder interactive. [Laughter] We've got government officials, regulators, business people, and nonprofits. Everyone is working together there to try to come up with some guidelines for how you measure the impact of IT, both from greening IT, but also how you measure the impact of IT on the rest of the economy in terms of sustainability. Really interesting, really (I would say) smart, collaborative work going on now.

Michael Krigsman: Of course, data centers are enormous consumers of power.

Alice Steenland: Yes.

What is the impact of Bitcoin on sustainability?

Michael Krigsman: Not to mention Bitcoin mining these days.

Alice Steenland: Yes. Yes, indeed. [Laughter] Yes, the bitcoin conversation is an ongoing one.

You've seen what happened with these announcements saying, "Oh, this is this cool new technology." Then the pushback saying, "Hey, whoa! This thing is going to destroy the planet even faster than before it existed."

That, I think, is a really interesting example of how tech is becoming increasingly focused on sustainability and how you actually can't talk about technology anymore without talking about simplification for the planet.

Michael Krigsman: Not meaning to put you on the spot, so please feel free to refuse to answer this.

Alice Steenland: [Laughter]

Michael Krigsman: Any thoughts on bitcoin?

Alice Steenland: Oh, my.

Michael Krigsman: [Laughter]

Alice Steenland: I am not a bitcoin expert. Cryptocurrencies, in general, they really see them as being linked to independence and some sort of basic kind of liberty and human rights (in a positive sense), a way of sort of decentralizing power, and that that is sort of the future of the economy. It's sort of a metaphor for the broader economy, which I think is quite beautiful.

Then there's the actual, you know, what's happening today. We have not figured out how to use these cryptocurrencies without very large amounts of energy consumption. That's just purely not sustainable, and so we've got to figure out another way to do it if we want to do it. Yeah, that is certainly a very controversial issue within tech and green. [Laughter]

Michael Krigsman: You're not going to tell us whether to buy bitcoin or not. [Laughter]

Alice Steenland: I am not going to take a position on that at all. No, I will not.

Michael Krigsman: Okay. Well, we have a great question from LinkedIn. This is from Sai Penumuru. He is the chief technologist at DXC Technology – a big company. He asks, "How has COVID-19 changed the role of sustainability for organizations?"

Alice Steenland: A lot of people were worried. This idea of Maslow's pyramid. You focus on what's your most essential need and then you move out from there. In periods of stress, you deprioritize things that are not essential.

I think there were a lot of folks in the sustainability community who were thinking, "Oh, dear. This is such a huge global challenge and such a huge global disruption that actually people are going to cut their sustainability work around the world just to go into survival mode."

What has been amazing is that the opposite has happened. There is more investment in sustainability, more interest in ESG. The inflows into ESG investment funds completely exploded during the pandemic.

Part of that, interestingly, is because the companies that were the most resilient were the ones that were the highest rating on a lot of ESG rankings. That's just because companies that are paying attention to ESG issues and sustainability issues have been working with their supply chains for years. They were very intimately connected to their supply chains and that gave them a certain level of knowledge, understanding, and resilience during the pandemic. That's an interesting side note.

There was also a global, I think, consciousness about our fragility, about our dependence on the natural world, about our role within it that was really called into question in a lot of people's minds. And so, I like to cite a survey that took place in the beginning of the pandemic where citizens from around the world (all countries) were asked, "Do you want your government to act as forcefully on climate change, for example, as they are right now on the pandemic?"

[Laughter] We've never seen anything like this action on the pandemic, right? We are shutting down the entire global economy to try to save people's health.

The answer was overwhelmingly yes, and that was in all countries. You saw North America at very high rates; Europe also around 70%, 80%; Asia as high as 90% in some countries.

This was a globally shared experience to say, "We are part of a natural ecosystem, we are in danger, and we don't want to go down this path anymore." This build-back better concept has really translated into more investment in sustainability in organizations, more investment from the financial front, and more regulation is coming online also because of that mindset shift.

Michael Krigsman: We have another question from Twitter. You can see, I prioritize the questions that come in from the audience. They tend to be great, great questions.

Alice Steenland: [Laughter] They are great because so far so good. Great questions.

Sustainability principles and data centers

Michael Krigsman: Okay, so picking up on the data center point earlier, Lisbeth Shaw asks, "How should data centers become more environmentally sustainable?" I guess we can just broaden it to, again, the whole data center issue.

Alice Steenland: Take the example of Dassault Systemes. If you measure our carbon footprint, if you include the emissions that come from the use of our software – that is the running of data centers to process the software around the world by all of our close to 300,000 customers – if you are taking those emissions into account in the footprint, it's close to 97% of our carbon footprint. It dwarfs anything that has to do with our office building heating or even the computers we're buying, et cetera.

It is actually a massive global footprint, and so this data center piece is really important. On the greening of that, there's a lot of work being done.

The first and, I would say, easiest answer is the idea of, well, where is the power coming from? Can we green the power source behind the data centers? Can we make sure that our cloud is run on green energy? Google and others are doing a lot of work in this space.

I think there's a real question about the massive amount of data that is being processed but is also being stored forever. You post something [laughter] and it stays on a server forever. That sort of massive accumulation, I think, at some point, there's going to be a big conversation about that accumulation and stocking of data all the time. I think that's another topic.

Then there's actual functioning of the data centers themselves. There is a lot of really creative stuff being done about using tech, in fact, to have sort of AI monitoring and optimization of data centers so you can really precisely control the heating and cooling systems, so you can recuperate the heat and turn that into energy, so that you can minimize (to a maximum) the water needed for cooling as well. There are a lot of really creative experimentation being done on the actual operations, I would say, of a data center.

Michael Krigsman: It's a very interesting point that you just made about the accumulation of data. All these large companies—Google, Microsoft—everything pretty much in the cloud involves increasing storage on a permanent basis. Therefore, the sustainability challenge is continuing to grow and there is no opportunity for a decrease if things are left alone. Again, is that a correct way to think about it?

Alice Steenland: I would say, in terms of prioritizing where folks are working, there is less work on that angle than there is on the greening of the energy sources, which is sort of, in some ways, the quick wins in that conversation. This sort of constantly increasing amounts of data, a lot of stuff has been written about also the consumption patterns in the consumer world.

I work on industrial kind of software, so we're mostly B2B, and we are active in life sciences and manufacturing in cities and things like that. But there is a real question in terms of changes of behavior of the average person in terms of how much we're consuming every day and how much of our time is spent in front of screens and how many videos we're [watching], that piece of consumption which is not correlated.

A lot of industrial software use, for example, is directly linked to making things more efficient in one way or another. People buy this kind of software to optimize. Either they're optimizing for efficiency or they're optimizing for CO2 reductions.

You kind of say, well, it's sort of balancing. It's going to consume energy on one side, but it's going to help other industries to really decarbonize faster.

For everything that is purely consumer consumption of media, consumption of IT, there it's more of a cultural sort of mindset thing, and so it becomes a much stickier problem to work on. The working groups I'm in are not talking about how do we deal with the number of YouTube videos out there. [Laughter] That's not what we're focused on. Also, because that's the hardest thing to talk about and to work on.

Michael Krigsman: You're looking for the quicker wins, the easier wins, essentially.

Alice Steenland: Yeah, the other side is, are you going to start limiting people's access to videos? These become intricate not just environmental questions but real social questions, real behavioral science questions, real freedom questions, liberty questions.

It becomes much more complicated and trickier. Yeah, I'd say people are very aware of it, but the hard work has not started, I would say.

Culture change and sustainable practices

Michael Krigsman: On the topic of thorny questions, we have a great question from Arsalan Khan again. Arsalan is a regular listener. He asks great questions. He says this. He says, "If there are economic, operational, and global benefits from sustainability, are you seeing resistance to sustainability and why?"

Alice Steenland: Like I said, I've been working in this space for more than 20 years. It is so different today. I like to give the image of being pushed and pulled.

I used to be pushing the organizations I was working in saying, "This is important. This is going to come. It's going to happen."

Now, I am being pulled by the organization saying, "Please help us do this. Teach us how to do this. Come with us to these meetings." So, the dynamic has completely shifted.

I'd say the resistance levels have just fallen off a cliff in the last two years, essentially, starting in maybe 2018. But really, with the pandemic, like I said, it's completely accelerated. The resistance has dropped off a cliff, I'd say.

Where it does exist, I'd equate it to one of those situations, like, "The future is here already but it's not distributed evenly," which is that the leading companies have totally gotten it, are working on it pretty seriously, see what's coming, and they're planning for that.

The real fabric of the economy is small and medium-sized companies that are not listed companies. They have not been subject to investor pressure. The real economy is another world, in fact.

I think what's happening now is you have this massive acceleration in large, listed corporations. What's happening is because we've hit that tipping point, it's translating – I'll give you an example – into legislation here where now climate risk reporting is going to not just be for those listed firms (towards their investors). It's going to be for any registered company at more than 500 employees.

What's happening is the legislation is going to basically, I would say, transform what was kind of a niche for leading players into a very generalized approach to what business is about. It's not just about being profitable. It's also about managing other issues and being strong on those other issues as well in terms of performance.

Michael Krigsman: Alice, how does an organization get started with this?

Alice Steenland: One way to get started is doing a bit like what we mentioned earlier, which is actually looking at where the hotspots are. Where are your biggest impacts from a financial perspective? There are some financial quick wins around environmental sustainability, so very basic stuff like changing your lightbulbs is actually a huge cost saver for most organizations.

There's stuff that's kind of low-hanging fruit. Then there are the things that are your biggest impact. Like we were talking about for digital, it really is this sort of impact of the digital itself: the data servers, the data centers, et cetera.

There is an impact assessment piece, but I would say, even above that, the first step is to think about the governance. The governance question, to me, is always core to how you can get anything done regardless of what you want to work on.

The first question is, how do you position this in your organization? What is the connection to the board of directors? What is the connection to the executive committee? How are you going to move your organization structurally and organizationally around the topic?

Then those people, once that is in place, will start running these materiality assessments and impact assessments and try to understand where they should be spending most of their time. But the first piece is, how am I going to run this topic in the organization? That's actually a governance question.

Michael Krigsman: Once you begin with a governance question, suddenly it seems that the problem, the challenge of implementing this organizationally becomes really hard.

Alice Steenland: The only way this thing is going to happen is if you have a very engaged executive committee and a very engaged board who is willing to invest in that governance. That's taking even a step back.

If you have that, if you've gotten to that stage of conversation saying, "This is something that's going to hit us in terms of investment, in terms of regulation, in terms of consumer demand, in terms of employee demands. We need to work on this," if you can get that conversation going and, again, I think the resistance to that message is so much lower today than it ever has been before, if you can get that conversation off the ground, that is the governance question.

Once you have an okay for that at the very top levels of the organization, then it's a normal follow-up question to say, "Okay, so where are we going to put the resources? How are we going to recruit somebody to do this and fix the accountability systems so that wherever they do makes sense, we agree with it, it's strategic, and it's smart?"

I don't know if it's more complicated or less. That first conversation is hard. But now, as I said, it's getting easier.

Michael Krigsman: I'm just thinking that any time you try to implement a change program in an organization, especially on a broad-based level, it's hard.

Alice Steenland: My job is in fact to be a change agent within the organization and to do change management and transformation processes. That skill set is as important or even more important than how much I understand about science-based targets and diversity inclusion reporting or what have you.

You're absolutely right, which is the real tricky part and, I would say, the core skill set of a chief sustainability officer is in fact that, which is, how do you move large, complex organizations? How do you get them to change? Yeah, that's a combination.

I like to say we sit on the edge of the company. So, what is the outside expecting from us and what are we? What do we want to do? What do we want to prioritize? And how do we merge those two together? How do we find the sweet spot where we're doing something that makes sense for us and makes sense for all these new demands coming in on this front?

Michael Krigsman: Constance Woodson is curious about carbon footprints in mainframe environments as distinct from cloud computing, cloud server environments. [Laughter]

Alice Steenland: [Laughter] People have heard a lot, this idea, like, it's greener on the cloud. Right? I don't actually know where that came from, exactly, because it all depends on what kind of data centers you are running, so how efficient they are, and mostly where they're located. Where does the energy come from?

If you have a cloud solution with some sort of shared cloud server or public cloud, but it's actually being run out of a country whose energy mix is entirely weighted towards coal, then that is not green. You'd be better off just running it on your own mainframe servers (wherever you are) if that energy mix is better.

I would say there's not really one answer to that question. It all depends on what the energy mix is, which is why some of the biggest public cloud providers are really trying to green their energy sources so that they can have that as a marketing argument to say, "We know we can provide you with a greener solution than what you've got today."

Today, it's not the case. It's really not clear that that's the case across the board.

Michael Krigsman: Thus, you see the rise of data centers in northern climates, whether it's Norway or Iceland, for example.

Alice Steenland: Mm-hmm. Yep, good point. Yep.

Michael Krigsman: Okay, so batteries are a hot topic right now. How can we make batteries more sustainable?

Alice Steenland: Eighty-five percent of the electric vehicles in the world are designed and created within our software, so our software was sort of at the heart of the electric vehicle revolution and the battery. The batteries are designed with this software.

Anyway, if I come back to the question, the real challenge with batteries, there's the question of how long they can last and how much energy they can stock, et cetera. But then the real question you hear a lot today is about, "Well, what about the end of life and the recycling?"

There are a lot of rare metals. There are a lot of really valuable materials in here. If you look at the total lifecycle impact of an electric vehicle battery, it's actually very heavy in terms of CO2 emissions. Using the car is less so, but making the battery needs to be counted into how you think about the total footprint, the total carbon footprint of a vehicle like that, for example.

The real issue or one of the big issues with batteries these days is this issue of, how do we get to a circular model? How do we move towards basically sort of throwing those materials away, which are actually becoming more and more valuable, and instead, keeping them in the economy for longer?

You're seeing the creation of global centers for recycling of electric batteries where they're going to try to recuperate (as much as possible) that material and get it back into the economy. Now, with some of the resource constraints on some of the elements necessary to run these, you're seeing individual companies (not just states) trying to organize how can I get that back.

There's something created here in France by Renault called Re-Factory. It's all about recuperating the materials and reusing them in the production system again.

How to get started with sustainable development

Michael Krigsman: Can you put on your organizational change agent hat for a moment and share some thoughts on where sustainability should live inside an organization?

Alice Steenland: One of the reasons you need to be a change agent is because it's one of the only functions in an organization that is completely transversal. We have to work with folks on tax policy, on facilities, on software design, on diversity inclusion issues, on executive remuneration issues, so we are literally working with almost every function in the organization.

Then the question of, "Well, under which function would it sit?" becomes a real question. That's why you've started to see the creation of these jobs actually either directly reporting to the board or directly reporting to the CEO because it's so completely transversal that there is actually no good place to put it except maybe at the top in terms of strategy as a strategic orientation.

I think that's a great question. Today, where those positions are—including mine and in many organizations—can sit actually anywhere. I've seen them in HR be highly effective. I've seen them sit on the product-facing side. I've seen them sit on the risk management side. It kind of depends to what extent your executive committee is actually engaged and they're serious about it, and then how good the person is at their job, frankly.

I happen to sit in a customer-facing part of the organization, so I am leading a lot of work with the folks who are defining market strategy. What products do we sell to whom? How can we be at the cutting edge of the sustainability needs of our customers? That's the scope that I'm slightly more focused on, but I am also still responsible for the carbon footprint of our data centers.

It can sit anywhere. The question is, how invested is the leadership and how much support do you have to get it done? It can work almost anywhere.

Michael Krigsman: What final advice do you have or final thoughts on sustainability that you can share with business leaders who are listening, who want to do something, and maybe even are hesitant, are unsure, or things aren't going as they planned?

Alice Steenland: I think now is really the time if you're not. If you don't feel like you're equipped to really take this on board in your strategy, now is the time to get ready for that because this is a dramatically changing, I would say, business ecosystem.

Changes are happening faster than I ever thought they would. We really hit a tipping point and now stuff is happening every day, like new legislation or new investor initiatives. It is accelerating very quickly, so my one piece of advice would be if you're not already working on this, please do get started because – to come back to the original definition of sustainability – I think it will be key to the long-term viability of a lot of our large organizations. I would say speed is of the essence. Yeah.

Michael Krigsman: Okay. Well, Alice Steenland, thank you so much for taking the time to be with us today.

Alice Steenland: It was my pleasure. It was really fun. Thank you so much, Michael.

Michael Krigsman: Everybody, thank you for watching, especially the folks who contributed such great questions. Now, before you go, please subscribe to our YouTube channel. Hit the subscribe button at the top of our website so we can send you our newsletter. It's a really good newsletter. Tell your friends and check out CXOTalk.com. We have great shows coming up. Thanks so much, everybody. I hope you have a great day, and we'll see you next time.

Alice Steenland: If you are not taking into account environmental issues, social issues; if you are not in sync with the society in which you're living in or you're operating in; your company is probably not going to be there in a long time.

What is the Chief Sustainability Officer role?

Michael Krigsman: We're speaking with Alice Steenland. She is the chief sustainability officer of Dassault Systemes. Alice, tell us about Dassault Systemes and give us a sense of your role as chief sustainability officer.

Alice Steenland: Dassault Systemes, for those of you who don't know us, we are sort of a world leader in what we call virtual twins, so creating a virtual universe in which you can in fact invent, design, and create anything. That's what we do. We make those for companies and also for universities and different sizes of organizations and types of organizations.

I am the chief sustainability officer there. It's a newly created function. It was created last year. But I have been the chief sustainability officer for many years in other organizations and have been working in this field for about 20 years.

Michael Krigsman: Why did Dassault Systemes create this chief sustainability officer role?

Alice Steenland: It's a company that has had (in its mission) a corporate purpose, as we say. This idea of enabling sustainable innovation to harmonize product, nature, and life. That's been there for many, many, many years.

I think the idea was that the virtual universe (in and of itself) helps increase the sustainability footprint of an organization because if you are no longer making thousands of physical prototypes and trying new manufacturing processes that you have to redo over and over again because you don't know if they will work, you are wasting massive amounts of resources, of energy, of water. You are being very wasteful, in fact.

Doing all of this in a virtual world means that you're doing it the first time right. You are being, in many ways, more efficient and more sustainable in the use of resources.

I think what has changed now and what pushed the company to create this function and create this position is really that the world has changed so much. Not only do people want to think, "Oh, well, I'm doing this better." They want to know exactly how they're doing this better. They want to measure the CO2. They want to measure the savings in terms of water. They want to measure their impact on the environment, understand what they're creating, what its impact on the world will be, and that's because the expectations are rising from investors, from consumers, from everyone across the board today.

What is sustainable development?

Michael Krigsman: There's a kind of rising tide of interest in sustainability. What does it actually mean? In the press, it's kind of used in a very loose way.

Alice Steenland: I've been in this space, as I mentioned, for a long time. I have seen, in very different parts of the world, it actually has different connotations.

It's not only a word that can be used very differently in English. So, I'm an American. I've used this word for a long time.

Not only does it have different interpretations here, but different interpretations across the world. I'll give you one definition – actually, two, if I can.

The first one is the actual meaning of the word sustainability, the original meaning, which was to say, if I am a sustainable company or sustainable organization, it means I will be here in 20, 30, 40 years. I can sustain my activity.

That's where the original concept came from, which is that if you are not taking into account environmental issues, social issues; if you are not in sync with the society in which you're living in or you're operating in; your company is probably not going to be there in a long time. That's actually, from an investment perspective or financial perspective, what we've seen. We've seen, for many years, sustainable or ESG high performers basically outperforming the market over long periods of time.

I think that's one way to think of it. It really is about the sustainability, the viability of the organization over time.

The second way of thinking about it is this ESG terminology: environmental, social, and governance issues. This is the definition used by the investment community to talk about sustainability. It just gives you an idea of what are some of the things that they're looking at.

In fact, a funny fact is that they used to call this extra-financial or non-financial information, which essentially meant that any indicator, any process, or any information about the organization that is not purely about revenues and sales can be considered material from an ESG perspective. So, it is a very broad topic.

What are the components of sustainability in business?

Michael Krigsman: When you, as a sustainability professional, talk about sustainability in business, are there components? How do you break it down? How do you think about it?

Alice Steenland: ESG, in itself, is a framework, right? You're looking at the E, the S, and the G. That's one type of framework. Another type of framework is taking all of those issues and looking at the most material issues for your sector and for your company.

Obviously, the issues that I'm focused on working in a tech company are not the same as my colleagues who do the same job in a food manufacturing firm, right? They're going to be very focused on agricultural issues, land use issues, biodiversity issues.

I am very focused on:

  • How do you green IT?
  • How does IT green the rest of the economy?

We're all working on slightly different aspects. So, materiality is another term you hear a lot, and that's a framework for thinking about which issues you prioritize within that.

Then there's another framework that's very commonly used, which is inside-out. Starting from, what are my own operations? For Dassault Systemes, what are our direct operations? Where are our priorities in that circle of influence? Then, what are we doing for the rest of the world? What are our products and services doing to impact the rest of the world?

Then beyond that, even beyond our customers, how are we engaging with the broader community, other types of stakeholders, regulators, investors, all of our supply chain? How are we interacting with that larger circle? That's another way of thinking and working on these topics is the inside-out type perspective.

Sustainable business practices: social development and economic development

Michael Krigsman: Correct me if I'm wrong. It seems like there are two components, two aspects. One is the business performance dimension. Then number two is something that strikes me as a little bit squishier, a little bit more vague, which has to do with contributing in a positive way to the world. Is that a correct way to view it?

Alice Steenland: [Laughter] That is one way to think about it. For example, there are different reporting frameworks out there. Some of them are focused on what are the ESG issues or the sustainability issues that will be most material financially within the next five to ten years.

That's one way of looking at it, and that's really about performance. Like, let's prioritize those issues that are going to actually translate into a direct financial impact in the medium-term – relatively soon.

Then there are other reporting frameworks in terms of what you're supposed to be accountable for that actually come from the stakeholder perspective. What are all of the stakeholders of the organization, and that includes the planet (the natural environment)? That includes civil society. That includes obviously your employees, your suppliers, and your customers.

But you can take that stakeholder perspective and say, "What is it that our company is doing that impacts them?" If we know that's important for our stakeholders, eventually, that will be important for us, and eventually, it will have a financial impact. If we don't take into account those stakeholder perspectives on what they care about, the issues they care about, eventually that's going to come back to sort of get us.

Those are two slightly different ways of looking at that set of issues that we've got in front of us.

Michael Krigsman: There are a number of different pieces that come into play when you talk about sustainability, and so it seems like the equation becomes very complex very quickly.

Alice Steenland: You could say that. I would say it's becoming even more complex because you've got concepts like not only zero-carbon; now we've got the circular economy. There are these different ways of thinking about how to get to the solution or how to find solutions to get to a much more sustainable economy, and they are going to be diverse and multiple and there will be lots of ideas out there.

In fact, we're seeing this rise in interest in the topic on all sides: regulators, consumers, et cetera. That means a proliferation of ideas of, "Oh, have we tried this? Can we try this?"

We need those new ideas. We need these, what I call moonshot ideas, crazy ideas. But that does put us in a situation where it's becoming a very noisy field with lots and lots of information, new initiatives being launched, new legislation being launched. And so, I think, for folks that are new to this topic, sometimes it can actually be quite overwhelming – even just the jargon. Yeah.

Michael Krigsman: One of the things that you've mentioned a couple of times are the economic impacts. Would you maybe explore that for us a little bit?

Alice Steenland: Let's just take what we've seen, I'd say in the last couple weeks. For those of you who have been following the news on this, several fossil fuel organizations had been hit by legal decisions, regulatory shifts, and a bunch of sort of unexpected (I would say) surprises in terms of questioning the core business model.

This is something that, for folks working on sustainability, has not come as a surprise because this type of event where you have sort of a sudden loss in the valuation of a company is quite common in the ESG field, which is that a topic like human rights, climate, or the way you treat your employees is not material until one day it is. It becomes very material all of a sudden, so there are a lot of these shocks to the system.

The health and safety on oil rigs hit BP very hard many decades ago, and there have been these repeated sort of shocks to the system. This is what we've called in the ESG investing committee for a long time – because I worked in finance for many years – "stranded assets".

These are assets that people own. They're in stocks and portfolios across the world. People have stakes in these companies, and they all of a sudden one day become stranded because the entire ecosystem around them has changed, the winds have changed, the tide has changed, and there's been some shock to the system that creates very drastic drops in valuation.

That's actually what we're starting to see with fossil fuels, but it's what we've seen with some other companies in terms of human rights abuses in their supply chain, et cetera. It's a very, I would say, material financial issue. I'm not even talking about the legislation that's coming online, which is going to be a direct cost for companies that are not ready for this.

Sustainability and ethical leadership

Michael Krigsman: Why is there this intersection between sustainability and ethical purpose? That seems less clear to me.

Alice Steenland: One of the (I say) thorniest topics comes back to your earlier question about, is there a financial side of this, and then sort of like a social kind of side of this? This is a space in running an organization today where those worlds are sort of mixing. It makes for a very thorny topic.

What we're seeing now is employees really speaking out very loudly about what they want or they don't want their companies to do in terms of policies, behaviors, and the way they engage with customers and things like that. We've seen it obviously in the areas of racial justice, but also in the areas of climate where actually the employee base is getting organized and saying, "We want more of this," or "We want less of this."

That never really happened before. That's really changing the dialog and the way people are thinking about the role of business in the world.

Before, you had your business side, and then you had people's ethics and their personal, you know, what's important to them personally, et cetera. These were two different spheres.

What we're seeing is this merging of the two spheres. That is making it very tricky. I think, for CEOs today, it is very complicated to walk that line.

Michael Krigsman: There is this very strong balance then between sustainability and the corporate policies, as they affect the social fabric, just in general.

Alice Steenland: Yeah. I think so. On the flip side, one of the things that is, I would say, getting easier in this topic is that I think the financial upside of doing more on environmental, social, and governance issues—and doing better in that area—is becoming much more clear as well, right? It's becoming trickier, harder, and more complicated, but the upside, I think, is becoming much clearer.

You have the rising generation of millennials. Very clear about the fact that they will associate, buy, and invest in organizations that prioritize environmental and social issues. They're putting their money where their mouth is, and what we're seeing is a generational shift in wealth towards that category of consumer, if you will, or citizen. That is just going to change the way you think about marketing products, about creating new products, about engaging consumers, and that's a big part of the new upside to sustainability, which is a very clear demand on that side.

Dassault Systemes headquarters is in France, and so we have a very large footprint globally, but a very large footprint here in the EU. We're subject to the EU regulations, and we are seeing things come online that are clearly going to change the playing field and are going to give a huge advantage to companies that know how to manufacture with zero carbon emissions, that know what a circular product looks like, and have an idea of a business model of how to make that work. Those companies are going to be positioned very well, and it's very clear that that's going to change the landscape and give it a real opportunity and advantages to companies that move quickly on this.

Michael Krigsman: Alice, is sustainability, therefore, a net positive or a net negative (from an economic standpoint) in business?

Alice Steenland: In the minds of most leaders around the world, it is right now changing quite quickly. I think this area, for a long time, was seen as kind of like compliance. It's like we have to do some of these things. It's not a legal requirement, but really everybody is expecting it from us, so we've kind of got to do it. It's a cost center, et cetera.

Now, I think we're in a very different space, which is, if you just take the energy sector and the massive global ambition on greening the energy sector—and that's just one sector but it's a very obvious one—if you're an energy player and you're not well positioned on renewables today, your business is going to be in trouble in a few years. You need to understand the dynamics of this change.

I think more and more folks are seeing that this is not about just sort of making people happy or doing the right thing. This is a massive global business opportunity.

In fact, there was some research done a few years ago talking about the energy transition and highlighting what sectors had to gain from the innovation, the innovations coming online, and the revenues that would come from those. We're talking about $12 trillion annually of new innovations and new opportunities for growth for different sectors. For the companies that are well-positioned on this, I think this is a wonderful, positive opportunity.

Michael Krigsman: Arsalan Khan says on Twitter, "All organizations use IT, and the greening of IT would definitely help them."

Alice Steenland: Absolutely.

Michael Krigsman: He asks, "Do organizations of different sizes and industries share their lessons learned with each other because, without that sharing, sustainability would be very piecemeal?"

Alice Steenland: The interesting thing about the tech sector is that it is the only sector where the emissions are exponentially growing year on year. That's because a lot of the other sectors are using technology to become more sustainable and green their operations.

It's a strange paradox, but it is calling increasingly more and more attention to the issue of green IT. You know I work for a software company. How do you green software, is becoming an issue.

Our friends at Microsoft just launched a green software foundation a week ago. This is becoming a big thing. How do you green software? How do you make code that's greener? The entire IT sector, especially the hardware producers, are very focused on this (the leading actors around the world) because it is a serious issue.

To the question about collaboration, just to give an example, we are part of a couple of organizations. One is called The Global Enabling Sustainability Initiative. That is an organization that brings together companies from the entire ICT sector – telecoms, hardware manufacturers, software manufacturers – bringing us together to say, how can we be more sustainable across the entire ICT sector?

We just launched, with that organization, something called Digital with Purpose, which will be a global certification scheme, a little bit like organic food today. You will get a label. If you are a high-performing, sustainable tech company. We're coordinating also with governments around the world to say, when you do your procurement and you are in government, this will be a sign of quality. This will be like a quality certification, like an ISO certification (in the future). That is an example of collaboration.

Another one is we're a founding member of the European Green Digital Coalition. That's a similar idea backed by the EU, so it's very stakeholder interactive. [Laughter] We've got government officials, regulators, business people, and nonprofits. Everyone is working together there to try to come up with some guidelines for how you measure the impact of IT, both from greening IT, but also how you measure the impact of IT on the rest of the economy in terms of sustainability. Really interesting, really (I would say) smart, collaborative work going on now.

Michael Krigsman: Of course, data centers are enormous consumers of power.

Alice Steenland: Yes.

What is the impact of Bitcoin on sustainability?

Michael Krigsman: Not to mention Bitcoin mining these days.

Alice Steenland: Yes. Yes, indeed. [Laughter] Yes, the bitcoin conversation is an ongoing one.

You've seen what happened with these announcements saying, "Oh, this is this cool new technology." Then the pushback saying, "Hey, whoa! This thing is going to destroy the planet even faster than before it existed."

That, I think, is a really interesting example of how tech is becoming increasingly focused on sustainability and how you actually can't talk about technology anymore without talking about simplification for the planet.

Michael Krigsman: Not meaning to put you on the spot, so please feel free to refuse to answer this.

Alice Steenland: [Laughter]

Michael Krigsman: Any thoughts on bitcoin?

Alice Steenland: Oh, my.

Michael Krigsman: [Laughter]

Alice Steenland: I am not a bitcoin expert. Cryptocurrencies, in general, they really see them as being linked to independence and some sort of basic kind of liberty and human rights (in a positive sense), a way of sort of decentralizing power, and that that is sort of the future of the economy. It's sort of a metaphor for the broader economy, which I think is quite beautiful.

Then there's the actual, you know, what's happening today. We have not figured out how to use these cryptocurrencies without very large amounts of energy consumption. That's just purely not sustainable, and so we've got to figure out another way to do it if we want to do it. Yeah, that is certainly a very controversial issue within tech and green. [Laughter]

Michael Krigsman: You're not going to tell us whether to buy bitcoin or not. [Laughter]

Alice Steenland: I am not going to take a position on that at all. No, I will not.

Michael Krigsman: Okay. Well, we have a great question from LinkedIn. This is from Sai Penumuru. He is the chief technologist at DXC Technology – a big company. He asks, "How has COVID-19 changed the role of sustainability for organizations?"

Alice Steenland: A lot of people were worried. This idea of Maslow's pyramid. You focus on what's your most essential need and then you move out from there. In periods of stress, you deprioritize things that are not essential.

I think there were a lot of folks in the sustainability community who were thinking, "Oh, dear. This is such a huge global challenge and such a huge global disruption that actually people are going to cut their sustainability work around the world just to go into survival mode."

What has been amazing is that the opposite has happened. There is more investment in sustainability, more interest in ESG. The inflows into ESG investment funds completely exploded during the pandemic.

Part of that, interestingly, is because the companies that were the most resilient were the ones that were the highest rating on a lot of ESG rankings. That's just because companies that are paying attention to ESG issues and sustainability issues have been working with their supply chains for years. They were very intimately connected to their supply chains and that gave them a certain level of knowledge, understanding, and resilience during the pandemic. That's an interesting side note.

There was also a global, I think, consciousness about our fragility, about our dependence on the natural world, about our role within it that was really called into question in a lot of people's minds. And so, I like to cite a survey that took place in the beginning of the pandemic where citizens from around the world (all countries) were asked, "Do you want your government to act as forcefully on climate change, for example, as they are right now on the pandemic?"

[Laughter] We've never seen anything like this action on the pandemic, right? We are shutting down the entire global economy to try to save people's health.

The answer was overwhelmingly yes, and that was in all countries. You saw North America at very high rates; Europe also around 70%, 80%; Asia as high as 90% in some countries.

This was a globally shared experience to say, "We are part of a natural ecosystem, we are in danger, and we don't want to go down this path anymore." This build-back better concept has really translated into more investment in sustainability in organizations, more investment from the financial front, and more regulation is coming online also because of that mindset shift.

Michael Krigsman: We have another question from Twitter. You can see, I prioritize the questions that come in from the audience. They tend to be great, great questions.

Alice Steenland: [Laughter] They are great because so far so good. Great questions.

Sustainability principles and data centers

Michael Krigsman: Okay, so picking up on the data center point earlier, Lisbeth Shaw asks, "How should data centers become more environmentally sustainable?" I guess we can just broaden it to, again, the whole data center issue.

Alice Steenland: Take the example of Dassault Systemes. If you measure our carbon footprint, if you include the emissions that come from the use of our software – that is the running of data centers to process the software around the world by all of our close to 300,000 customers – if you are taking those emissions into account in the footprint, it's close to 97% of our carbon footprint. It dwarfs anything that has to do with our office building heating or even the computers we're buying, et cetera.

It is actually a massive global footprint, and so this data center piece is really important. On the greening of that, there's a lot of work being done.

The first and, I would say, easiest answer is the idea of, well, where is the power coming from? Can we green the power source behind the data centers? Can we make sure that our cloud is run on green energy? Google and others are doing a lot of work in this space.

I think there's a real question about the massive amount of data that is being processed but is also being stored forever. You post something [laughter] and it stays on a server forever. That sort of massive accumulation, I think, at some point, there's going to be a big conversation about that accumulation and stocking of data all the time. I think that's another topic.

Then there's actual functioning of the data centers themselves. There is a lot of really creative stuff being done about using tech, in fact, to have sort of AI monitoring and optimization of data centers so you can really precisely control the heating and cooling systems, so you can recuperate the heat and turn that into energy, so that you can minimize (to a maximum) the water needed for cooling as well. There are a lot of really creative experimentation being done on the actual operations, I would say, of a data center.

Michael Krigsman: It's a very interesting point that you just made about the accumulation of data. All these large companies—Google, Microsoft—everything pretty much in the cloud involves increasing storage on a permanent basis. Therefore, the sustainability challenge is continuing to grow and there is no opportunity for a decrease if things are left alone. Again, is that a correct way to think about it?

Alice Steenland: I would say, in terms of prioritizing where folks are working, there is less work on that angle than there is on the greening of the energy sources, which is sort of, in some ways, the quick wins in that conversation. This sort of constantly increasing amounts of data, a lot of stuff has been written about also the consumption patterns in the consumer world.

I work on industrial kind of software, so we're mostly B2B, and we are active in life sciences and manufacturing in cities and things like that. But there is a real question in terms of changes of behavior of the average person in terms of how much we're consuming every day and how much of our time is spent in front of screens and how many videos we're [watching], that piece of consumption which is not correlated.

A lot of industrial software use, for example, is directly linked to making things more efficient in one way or another. People buy this kind of software to optimize. Either they're optimizing for efficiency or they're optimizing for CO2 reductions.

You kind of say, well, it's sort of balancing. It's going to consume energy on one side, but it's going to help other industries to really decarbonize faster.

For everything that is purely consumer consumption of media, consumption of IT, there it's more of a cultural sort of mindset thing, and so it becomes a much stickier problem to work on. The working groups I'm in are not talking about how do we deal with the number of YouTube videos out there. [Laughter] That's not what we're focused on. Also, because that's the hardest thing to talk about and to work on.

Michael Krigsman: You're looking for the quicker wins, the easier wins, essentially.

Alice Steenland: Yeah, the other side is, are you going to start limiting people's access to videos? These become intricate not just environmental questions but real social questions, real behavioral science questions, real freedom questions, liberty questions.

It becomes much more complicated and trickier. Yeah, I'd say people are very aware of it, but the hard work has not started, I would say.

Culture change and sustainable practices

Michael Krigsman: On the topic of thorny questions, we have a great question from Arsalan Khan again. Arsalan is a regular listener. He asks great questions. He says this. He says, "If there are economic, operational, and global benefits from sustainability, are you seeing resistance to sustainability and why?"

Alice Steenland: Like I said, I've been working in this space for more than 20 years. It is so different today. I like to give the image of being pushed and pulled.

I used to be pushing the organizations I was working in saying, "This is important. This is going to come. It's going to happen."

Now, I am being pulled by the organization saying, "Please help us do this. Teach us how to do this. Come with us to these meetings." So, the dynamic has completely shifted.

I'd say the resistance levels have just fallen off a cliff in the last two years, essentially, starting in maybe 2018. But really, with the pandemic, like I said, it's completely accelerated. The resistance has dropped off a cliff, I'd say.

Where it does exist, I'd equate it to one of those situations, like, "The future is here already but it's not distributed evenly," which is that the leading companies have totally gotten it, are working on it pretty seriously, see what's coming, and they're planning for that.

The real fabric of the economy is small and medium-sized companies that are not listed companies. They have not been subject to investor pressure. The real economy is another world, in fact.

I think what's happening now is you have this massive acceleration in large, listed corporations. What's happening is because we've hit that tipping point, it's translating – I'll give you an example – into legislation here where now climate risk reporting is going to not just be for those listed firms (towards their investors). It's going to be for any registered company at more than 500 employees.

What's happening is the legislation is going to basically, I would say, transform what was kind of a niche for leading players into a very generalized approach to what business is about. It's not just about being profitable. It's also about managing other issues and being strong on those other issues as well in terms of performance.

Michael Krigsman: Alice, how does an organization get started with this?

Alice Steenland: One way to get started is doing a bit like what we mentioned earlier, which is actually looking at where the hotspots are. Where are your biggest impacts from a financial perspective? There are some financial quick wins around environmental sustainability, so very basic stuff like changing your lightbulbs is actually a huge cost saver for most organizations.

There's stuff that's kind of low-hanging fruit. Then there are the things that are your biggest impact. Like we were talking about for digital, it really is this sort of impact of the digital itself: the data servers, the data centers, et cetera.

There is an impact assessment piece, but I would say, even above that, the first step is to think about the governance. The governance question, to me, is always core to how you can get anything done regardless of what you want to work on.

The first question is, how do you position this in your organization? What is the connection to the board of directors? What is the connection to the executive committee? How are you going to move your organization structurally and organizationally around the topic?

Then those people, once that is in place, will start running these materiality assessments and impact assessments and try to understand where they should be spending most of their time. But the first piece is, how am I going to run this topic in the organization? That's actually a governance question.

Michael Krigsman: Once you begin with a governance question, suddenly it seems that the problem, the challenge of implementing this organizationally becomes really hard.

Alice Steenland: The only way this thing is going to happen is if you have a very engaged executive committee and a very engaged board who is willing to invest in that governance. That's taking even a step back.

If you have that, if you've gotten to that stage of conversation saying, "This is something that's going to hit us in terms of investment, in terms of regulation, in terms of consumer demand, in terms of employee demands. We need to work on this," if you can get that conversation going and, again, I think the resistance to that message is so much lower today than it ever has been before, if you can get that conversation off the ground, that is the governance question.

Once you have an okay for that at the very top levels of the organization, then it's a normal follow-up question to say, "Okay, so where are we going to put the resources? How are we going to recruit somebody to do this and fix the accountability systems so that wherever they do makes sense, we agree with it, it's strategic, and it's smart?"

I don't know if it's more complicated or less. That first conversation is hard. But now, as I said, it's getting easier.

Michael Krigsman: I'm just thinking that any time you try to implement a change program in an organization, especially on a broad-based level, it's hard.

Alice Steenland: My job is in fact to be a change agent within the organization and to do change management and transformation processes. That skill set is as important or even more important than how much I understand about science-based targets and diversity inclusion reporting or what have you.

You're absolutely right, which is the real tricky part and, I would say, the core skill set of a chief sustainability officer is in fact that, which is, how do you move large, complex organizations? How do you get them to change? Yeah, that's a combination.

I like to say we sit on the edge of the company. So, what is the outside expecting from us and what are we? What do we want to do? What do we want to prioritize? And how do we merge those two together? How do we find the sweet spot where we're doing something that makes sense for us and makes sense for all these new demands coming in on this front?

Michael Krigsman: Constance Woodson is curious about carbon footprints in mainframe environments as distinct from cloud computing, cloud server environments. [Laughter]

Alice Steenland: [Laughter] People have heard a lot, this idea, like, it's greener on the cloud. Right? I don't actually know where that came from, exactly, because it all depends on what kind of data centers you are running, so how efficient they are, and mostly where they're located. Where does the energy come from?

If you have a cloud solution with some sort of shared cloud server or public cloud, but it's actually being run out of a country whose energy mix is entirely weighted towards coal, then that is not green. You'd be better off just running it on your own mainframe servers (wherever you are) if that energy mix is better.

I would say there's not really one answer to that question. It all depends on what the energy mix is, which is why some of the biggest public cloud providers are really trying to green their energy sources so that they can have that as a marketing argument to say, "We know we can provide you with a greener solution than what you've got today."

Today, it's not the case. It's really not clear that that's the case across the board.

Michael Krigsman: Thus, you see the rise of data centers in northern climates, whether it's Norway or Iceland, for example.

Alice Steenland: Mm-hmm. Yep, good point. Yep.

Michael Krigsman: Okay, so batteries are a hot topic right now. How can we make batteries more sustainable?

Alice Steenland: Eighty-five percent of the electric vehicles in the world are designed and created within our software, so our software was sort of at the heart of the electric vehicle revolution and the battery. The batteries are designed with this software.

Anyway, if I come back to the question, the real challenge with batteries, there's the question of how long they can last and how much energy they can stock, et cetera. But then the real question you hear a lot today is about, "Well, what about the end of life and the recycling?"

There are a lot of rare metals. There are a lot of really valuable materials in here. If you look at the total lifecycle impact of an electric vehicle battery, it's actually very heavy in terms of CO2 emissions. Using the car is less so, but making the battery needs to be counted into how you think about the total footprint, the total carbon footprint of a vehicle like that, for example.

The real issue or one of the big issues with batteries these days is this issue of, how do we get to a circular model? How do we move towards basically sort of throwing those materials away, which are actually becoming more and more valuable, and instead, keeping them in the economy for longer?

You're seeing the creation of global centers for recycling of electric batteries where they're going to try to recuperate (as much as possible) that material and get it back into the economy. Now, with some of the resource constraints on some of the elements necessary to run these, you're seeing individual companies (not just states) trying to organize how can I get that back.

There's something created here in France by Renault called Re-Factory. It's all about recuperating the materials and reusing them in the production system again.

How to get started with sustainable development

Michael Krigsman: Can you put on your organizational change agent hat for a moment and share some thoughts on where sustainability should live inside an organization?

Alice Steenland: One of the reasons you need to be a change agent is because it's one of the only functions in an organization that is completely transversal. We have to work with folks on tax policy, on facilities, on software design, on diversity inclusion issues, on executive remuneration issues, so we are literally working with almost every function in the organization.

Then the question of, "Well, under which function would it sit?" becomes a real question. That's why you've started to see the creation of these jobs actually either directly reporting to the board or directly reporting to the CEO because it's so completely transversal that there is actually no good place to put it except maybe at the top in terms of strategy as a strategic orientation.

I think that's a great question. Today, where those positions are—including mine and in many organizations—can sit actually anywhere. I've seen them in HR be highly effective. I've seen them sit on the product-facing side. I've seen them sit on the risk management side. It kind of depends to what extent your executive committee is actually engaged and they're serious about it, and then how good the person is at their job, frankly.

I happen to sit in a customer-facing part of the organization, so I am leading a lot of work with the folks who are defining market strategy. What products do we sell to whom? How can we be at the cutting edge of the sustainability needs of our customers? That's the scope that I'm slightly more focused on, but I am also still responsible for the carbon footprint of our data centers.

It can sit anywhere. The question is, how invested is the leadership and how much support do you have to get it done? It can work almost anywhere.

Michael Krigsman: What final advice do you have or final thoughts on sustainability that you can share with business leaders who are listening, who want to do something, and maybe even are hesitant, are unsure, or things aren't going as they planned?

Alice Steenland: I think now is really the time if you're not. If you don't feel like you're equipped to really take this on board in your strategy, now is the time to get ready for that because this is a dramatically changing, I would say, business ecosystem.

Changes are happening faster than I ever thought they would. We really hit a tipping point and now stuff is happening every day, like new legislation or new investor initiatives. It is accelerating very quickly, so my one piece of advice would be if you're not already working on this, please do get started because – to come back to the original definition of sustainability – I think it will be key to the long-term viability of a lot of our large organizations. I would say speed is of the essence. Yeah.

Michael Krigsman: Okay. Well, Alice Steenland, thank you so much for taking the time to be with us today.

Alice Steenland: It was my pleasure. It was really fun. Thank you so much, Michael.

Michael Krigsman: Everybody, thank you for watching, especially the folks who contributed such great questions. Now, before you go, please subscribe to our YouTube channel. Hit the subscribe button at the top of our website so we can send you our newsletter. It's a really good newsletter. Tell your friends and check out CXOTalk.com. We have great shows coming up. Thanks so much, everybody. I hope you have a great day, and we'll see you next time.